Pland to transfer over-the-counter bill payment services from the banks to An Post are in doubt following the Competition Authority's decision to reject an application for a licence by the Irish Payment Services Organisation (IPSO). IPSO is the umbrella body for payment services for financial institutions in the Republic.

Last night IPSO, AIB, Bank of Ireland and An Post said they were disappointed by the decision.

An authority spokesman said it had concentrated on the compatibility of the proposed arrangements with the Competition Acts.

"The fact that the banks were acting together in withdrawing and transferring services was key to our reaching a decision," he said. The spokesman said the authority viewed the proposal as anti-consumer as it would restrict choice.

IPSO chief executive Mr Stewart MacKinnon said: "This decision, which has taken an inordinate amount of time, is a regressive step and is not in the best interests of consumers. It is also inconsistent with stated Government policy on electronic payments."

Mr David Holden, Bank of Ireland, said: "We cannot understand it."

There was a coincidence of interest here with the banks, An Post, consumers and the Government's national payment strategy, he said. Mr Holden said it was of national interest to modernise the State's inefficient paper-based payments infrastructure.

An AIB spokesman said the bank was disappointed and confused by the decision.

"We've been asked on the one hand by the Government to look at the whole area of co-operation in payments and now that we have tried to get together on the first strand, we can't do it."

An Post stood to gain five to seven million additional transactions per annum from the over-the-counter deal. Its Billpay system currently handles 15 million transactions a year. A spokesman for An Post said it was disappointed that it might not get that business now but he maintained it was still on target to grow its Billpay division by 30 per cent this year.

Dormant accounts may not be State cash cow, page 2